When job seekers outnumber jobs 5 to 1, punitive policy is harmful

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Eva Cox does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

The prime object of welfare reform should be to increase the well-being of people rather to reduce public expenditure. Good policy should be able to achieve both goals over the longer term. Too many current proposals, however, are likely to cause damage that increases costs and affects social cohesion.

Proposed policies in the budget and McClure report that focus on cutting income support or tightly controlling recipients’ spending are highly unlikely to achieve either of the above goals. Instead, they will create a subgroup of people with no income and/or suffering further stigma because they are denied control over basic decisions.

The Australian’s post-budget editorial echoes the official view on welfare, but this approach disregards the factual evidence of whether this is likely to produce effective policy:

As Mr Hockey has argued, welfare is meant to provide a safety net, not become a cargo net. Australians know that our most vulnerable will be looked after; governments should help the poor and disadvantaged, but those who can work or provide for themselves should not be discouraged to do so.

The proposals are a further move away from the postwar consensus on the need for a welfare state. That derived from the political damage done by high unemployment and inequalities in the lead-up to the Second World War. In a time when inequality is again alarming even the International Monetary Fund (IMF), we need to examine whether the risks of introducing both savage cuts and spending controls exceed the possible benefits.

A false assumption of blame

The welfare policy shift seems to be based on a more individualised view of unemployment rather than a social or structural analysis. The faults are seen as being on the supply side of labour, not with the lower demand for labour generally. Unemployment is assumed to be the result of problematic job seekers who fail to get a job and/or live disordered lives.

Policy makers should be aware that there are, at least, five unemployed job seekers for every official job vacancy. The official Australian Bureau of Statistics (ABS) count excludes job changers or non-active seekers willing to take one, so the ratio of job competitors to jobs could be twice as high. This means the chances of success are very limited, particularly for those who are not well qualified, lack recent experience or encounter employer prejudices.

Heavying those who are unlikely to succeed in such circumstances is pointless and punitive. Yet proposed “reforms” clearly assume that younger people need their welfare income cut because they are not properly trying to find paid work.

The clear example is the budget proposal of a six-month wait for unemployment benefits for those under 30. Less known is a proposal before the Senate to cut payments for those who miss appointments with job agencies or are seen as not pursuing a job deemed suitable by Centrelink. These often futile processes are difficult to negotiate and often totally unproductive.

Article 6 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right to work. This includes the right to the opportunity to gain a living by work which the person freely chooses or accepts and is considered an inherent part of human dignity.

That sounds good but further down the tone changes as the right to work becomes an obligation:

The imposition of an eight-week non-payment for refusing an offer of suitable work does not unreasonably restrict the right to freely choose or accept work …

Policy bereft of supporting evidence

Another aspect of this punitive approach is income management (IM). Despite the lack of any evidence of its benefits, as well as high administrative costs, ideological beliefs of recipient incompetence are pushing expansion.

While the above changes cut spending costs, in this case an expensive program is being expanded. The budget allocated A$100 million to extend income management for the next 12 months with suggestions of further expansion.

Administration costs amount to over $3500 per person for the 28,000 current recipients. The costs come from policing the spending of more than 50% of their income support. This expensive option relies on assumptions about the incompetence of the recipients.

Consideration should be given to incorporating income management as part of a package of support services available to job seekers who need to stabilise their circumstances and develop a pathway to work or study.

Income management has been a controversial welfare reform. While conditions have always been applied to eligibility for welfare payments, restrictions on how payments may be spent are a new development, criticised by some as paternalist and stigmatising. Income management is also relatively expensive to administer, with an estimated cost up to 2014–15 in the range of $1 billion.

Seven years after its first roll-out, the evidence for income management is weak at best.Centrelink, CC BY

Other reports find little evidence of benefits. A government-funded evaluation of the seven-year-old Northern Territory versions of IM failed to show clear outcomes, as in many earlier reports.

At best, some participants said they have had good experiences. Many others reported seriously negative experiences. The report concluded:

There are few, if any, strong and consistent impacts of NIM; rather, there have been diverse outcomes. This is reflected in the wide and inconsistent range of views and experiences of income management.

On the basis of these and other similar reports, it is hard to justify an extended version, let alone its continuation.

Focus on structures not the individual

The evidence is that long-term non-employment is more about social and physical barriers than the character of the job seeker, so the justification for punitive approaches becomes less convincing. The potential damage to those on the receiving end of extra cuts and controls may well create greater costs in the longer term.

If we had a welfare program based on assumptions that society has failed most of those who need income support, it would look very different. Stigmatising the many recipients because a few may not be enthusiastic seekers of non-existent jobs does not justify wholesale cuts.

Similarly, infantilising income recipients because a few need or want help with financial issues is wrong. They could be offered cheaper voluntary assistance through Centrepay, without losing the right to control their spending.

Policy proposals need to be tested against solid criteria. There is no evidence that reducing and controlling spending capacity are effective remedies for the unemployed.

Blaming the victims may be politically useful but obscures the real issues. These include a shortage of jobs and barriers to work created by employer prejudices. The risks include damaging the vulnerable by encouraging hostile public responses to their needs and reinforcing their lack of self-worth.